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British government says BSkyB must cut ITV stake

British government says BSkyB must cut ITV stake
Tuesday, January 29th, 2008

The British government ruled today that media giant BSkyB must cut its holding in independent television broadcaster ITV to below 7.5 percent, as recommended by competition authorities. BSkyB snapped up 17.9 percent of ITV for Ł940 million (1.39 billion euros, $1.78 billion) in November 2006. However, many analysts saw the move as preventing an ITV tie-up with BSkyB’s fierce rival Virgin Media.

A government statement said that Secretary of State for Business and Enterprise John Hutton had now ruled that the 17.9-percent stake “results in a substantial lessening of competition within the UK market for all television.” Hutton will also seek “undertakings from BSkyB requiring the company not to dispose of the shares to an associated person, not to seek or accept representation on the board of ITV and not to reacquire shares in ITV.”

In response, ITV said it welcomed the news. “We believe this decision is in the best interests of the overwhelming majority of our shareholders,” it said in a statement. BSkyB declined to comment beyond a brief separate statement saying it would give “careful consideration to the announcement and confirm any further steps in due course.”

The government’s decision could cost the British pay-TV giant about Ł250 million if it is forced to sell down its stake — because ITV shares have tumbled in value since BSkyB bought its holding at the end of 2006. The long-awaited ruling was in line with recommendations published last month by the Competition Commission (CC).

In December, the CC had recommended to Hutton that BSkyB should be asked to slash its ITV stake to under 7.5 percent. The competition body had also recommended that BSkyB undertakes not to seek or accept a seat on ITV’s board. BSkyB is 39-percent owned by News Corp, the sprawling global empire run by media mogul Rupert Murdoch.